Only the U.S. Treasury Department, which owns 37 percent of the
former General Motors Co unit, is expected to sell stock in the IPO.
Both the government and Ally are hoping it would be able to sell the
stake in one go, which would translate to a roughly $4.5 billion IPO
at the valuations being considered, the sources said.
At the very least, Ally is expecting the U.S. government will be
able to sell $2 billion worth of stock in the IPO, which is roughly
the money that the company still owes Treasury.
The sources said that while March is the preferred month for the
sale, the size and timing of the offering have not been finalized
and will depend on market conditions.
A successful IPO would see the last of the major banks repaying
taxpayers for its crisis-era rescue and mark an important milestone
in Ally's multi-year turnaround effort.
It would also add to the gains the government has recorded so far
from the Troubled Asset Relief Program, which was its main vehicle
to rescue the nation's banks. Last month, Treasury said it had
recovered about $436 billion compared to the $422.2 billion
disbursed under TARP.
A Treasury spokesman declined to comment.
The government injected $17.2 billion into Ally after the bank's
Residential Capital mortgage unit suffered deep losses from home
loans that went bad.
Since then, Ally has been trying to fix its problems and repay the
government, taking steps including putting ResCap into bankruptcy,
reducing expensive debt and selling assets. By mid-January, it had
paid more than $15.3 billion, including dividend and interest
payments, to Treasury.
Ally, formerly known as GMAC, faces challenges and increased
competition in its main auto lending business, especially as it is
no longer the preferred lender for GM and Chrysler.
Earlier this month, it posted a lower fourth-quarter profit, hurt by
a charge to settle allegations by regulators that it discriminated
in auto lending against minorities. Its auto lending business also
slowed in the quarter, with new loans falling 8 percent to $8.2
billion as its agreement to be Chrysler's preferred lender expired.
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Still, the bank has seen demand for its shares ramp up in recent
months, with investors paying increasingly higher prices in private
transactions as they were encouraged by Ally's progress in resolving
the ResCap problems.
In January, Treasury sold about 27 percent of the company in a
private offering of 410,000 shares at $7,375 per share, raising $3
billion. Treasury said at the time that it would further wind down
the investment through either a public offering, private sale or
The private placement price, which values the government's remaining
stake at $4.2 billion, is seen as the floor for valuing Ally shares
in the IPO, one of the sources said.
The IPO price is expected to be at a premium over the last sale
price. A large stock split is also expected before the offering,
which would reduce the face value of the shares that are sold to the
public, the source added.
Activist investor Daniel Loeb, whose hedge fund Third Point bought
around 9.5 percent of Ally's shares in the past few months, last
month called the company "a highly successful, nearly completed
restructuring that remains undervalued, with an explosive earnings
Ally is working with banks including Citigroup Inc, Goldman Sachs
Group Inc, Morgan Stanley and Barclays Plc, on the IPO.
Ally initially filed for an IPO in March 2011, but the company
delayed its plans several times due to market conditions and as it
faced potential fines over its mortgage practices.
(Edited by Martin Howell)
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